Price Growth in Prime Global Cities

The world’s prime residential cities are set to see property prices rise by an average of 1.6% over the coming 12 months, according to the latest forecasts from Savills, as vaccine rollouts promise to thwart the current Coronavirus pandemic. Seoul, Berlin and Sydney are likely to see the highest rates of house price inflation in 2021.

Seoul, Hangzhou and Berlin saw the highest capital value growth in 2020 of the 30 cities tracked in Savills’ World Cities Prime Residential Index. Hong Kong retains its title as the most expensive city for prime residential property. Prime values here are 78% above second ranked New York.

Property markets in most of the tracked cities proved remarkably resilient in the second half of 2020, with the index recording an average capital growth rate of +0.8%. That more than offset the 0.3% decline seen in the first half of the year, leaving the annual rate of change at +0.5%.

“Many of the factors which helped drive prime residential market in the second half of 2020 are expected to continue into 2021,” explains Sophie Chick, head of Savills World Research, “including historically low interest rates, the desire for more space and low stock levels in some locations. These factors, and the sectors strong fundamentals, mean positive price growth is expected in 19 cities compared to nine that are expected to see small price falls this year.”

Cities in China saw strong price performance in 2020. Hangzhou topped the Chinese cities in the index.

Mumbai saw the largest price fall over the year of any of the 30 cities tracked in the Savills World Cities Prime Residential Index, as the city continued to grapple with oversupply while the country was badly impacted by the virus. Price declines did, however, slow in the second half of the year as stamp-duty reductions were introduced in September.

Hong Kong also saw a big drop. Prime values in Hong Kong have been moving downwards since their June 2019 peak as political unrest thwarts demand and activity. Price falls stabilised in the second half of the year, as the recent decline in prices attracted some buyers looking to benefit from the better value on offer.

In many other prime cities – including Berlin, Amsterdam and Paris – continued low supply of prime resi property propped up values through 2020, despite the pandemic.

Lisbon saw the largest price falls in 2020 of the European cities in the index. Travel restrictions hindered the market here which is driven by international buyers. Tourism is also an important driver for the local economy.

Prime price performance for all the US cities in the index improved in the second half of the year compared with the first half. Factors such as loosening Covid-19 restrictions, attractive interest rates and a strong stock market gave the prime market a boost over this period.

Los Angeles saw the strongest growth through the year, followed by Miami. Both cities saw strong activity in the second half of the year driven by demand for detached homes. Prime values in San Francisco remained slightly up for the year, as supply levels in the city remain low. New York was slightly down for the year, the prime market here faces existing oversupply.

Elsewhere, Cape Town and Dubai also saw prime values decline over the past year. Cape Town’s market was already adjusting to a weaker economic environment prior to the pandemic. Meanwhile, Dubai’s market has been dampened by oversupply in recent years. Price falls slowed in the second half of the year, however, helped by high demand for villas.